How do oil price uncertainty and economic policy uncertainty influence achievement of net-zero emissions targets by 2050? A quantile-based analysis

Abstract

ABSTRACT Governments globally have prioritized carbon neutrality and reduction as a response to the intensifying menace of climate change. These objectives align with the United Nations Sustainable Development Goals (UNSDG-13), stressing the imperative to take decisive action on climate change. Thus, this study aimed to assess the impact of oil price uncertainty, economic policy uncertainty, financial development, and renewable energy on ecological proxies (CO2 emissions, Ecological footprint, and Load capacity factor) using quarterly data spanning from 1990 to 2019. As far as the investigators are aware, this is the first empirical analysis examining the impact of oil price uncertainty on ecological quality. To achieve this, we employed advanced techniques, including quantile-on-quantile KRLS (QQKRLS) and quantile-on-quantile Granger causality (QQGC), to analyse the interconnections among these variables. The findings based on the load capacity factor exposed that renewable energy, economic policy uncertainty, financial development, and economic growth positively contribute to ecological quality, whereas oil price uncertainty has a detrimental effect. Additionally, as a measure of robustness, CO2 emissions and ecological footprint were included in the analysis, demonstrating comparable outcomes when assessed alongside the load capacity factor model. Furthermore, QQGC results demonstrated that all regressors significantly forecast ecological quality. Drawing from the findings, policy interventions ought to prioritize incentivizing the adoption of renewable energy, mitigating economic policy uncertainty, fostering financial development, and stimulating economic growth as pivotal strategies for augmenting ecological quality. Furthermore, integrating measures to alleviate oil price uncertainty stands as a crucial imperative for ensuring environmental sustainability.